Tax deductibility of MI premiums
MI became tax deductible in 2007, but the deduction expired after tax year 2021. Data through tax year 2021 shows:
- $64.7 Billion: Total MI deductions claimed by homeowners
- 44.5 Million: Number of times the MI deduction has been claimed
- 3.4 Million: Average annual number of homeowners who claim the MI deduction
- $1,454: Average annual MI deduction amount per qualified taxpayer
MI tax deduction should be made permanent
Beginning in 2007, and subject to periodic extensions by Congress, the tax code allowed qualified homeowners to deduct from their federal income taxes MI premiums paid to private MI companies and government agencies, including the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), and U.S. Department of Agriculture’s (USDA) Rural Housing Service (RHS).
From 2007 to 2021, an average of 3.4 million homeowners annually claimed the MI premium tax deduction, and a total of $64.7 billion in deductions have been claimed. This important tax policy has supported low- and moderate-income homeowners, who on average have received an annual deduction of $1,454. That deduction was slightly higher for tax year 2021 as qualifying middle-class homeowners received an average deduction of $2,364, according to IRS data.
Tax deduction for MI premiums has been extended several times
This tax policy was extended most recently in December 2020 as part of the Consolidated Appropriations Act of 2021, which covered tax filings for 2020 and 2021. USMI continues to call on Congress to support existing homeowners and prospective homebuyers by extending the deduction and making it permanent. While this deduction has benefited millions of homeowners since 2007, its effectiveness is diminished by:
- It’s temporary nature.
- Its adjusted gross income (AGI) cap, which has never been raised.
The ability of borrowers to deduct MI premiums from federal income taxes should be made permanent because MI premiums are the economic equivalent of mortgage interest payments, and so should be deductible and at parity with mortgage interest payments. Further, the existing AGI phaseout should be increased or eliminated since the MI premium deduction is the only itemized deduction subject to such a cap and the phaseout has never been adjusted.
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Additional Resources
- Letter: Statement for the Record for U.S. Senate Committee on Finance’s hearing, “Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families.”
- Letter: Joint Trades Letter to Senate Finance Committee in Support of MI Tax Deduction
- Letter: Joint Trades Letter to House Ways and Means Committee in Support of MI Tax Deduction
- Letter: Statement to House Committee on Ways and Means’ Hearing, “Nowhere to Live: Profits, Disinvestment, and the American Housing Crisis”
- Letter: Statement to Senate Finance Committee Hearing, “The Role of Tax Incentives in Affordable Housing”
- Letter: USMI Calls for Senate Finance Committee to Co-Sponsor the Middle Class Mortgage Insurance Premium Act of 2022
- Major Housing Industry Trades and Homeownership Advocates Letter on Tax Treatment of MI Premiums
- USMI Letter to the Joint Committee on Taxation
